I wouldn't say it's racist at all since it's just like a description and as Nic said we have the same flag idea on forums so it wouldn't be like "only europeans can login server 4" or something, it's just to let users know.
Personally I'm neutral, I mean if you play 5 minutes you'll easily figure out which is NA host and which is European host, to rename the servers may not really be necessary.
I personally would love more to see the cool names of servers listed in server selection for example:
Instead of
InfinityMU Connect - 3 > Gaia
InfinityMU Connect - 4 > Valhala
(We already have cool names for the servers but they're not visible to the community).